Corporate Finance - Exam 1 UPDATED
ACTUAL Exam Questions and CORRECT
Answers
What is corporate finance? - CORRECT ANSWER - What assets a company should buy
What projects to invest in
How to raise cash to finance these investments
in order to MAINTAIN AND MAXIMIZE ECONOMIC VALUE
Ultimately, the firm must be a __ - CORRECT ANSWER - cash generating activity
The cash flows from the firm must __ the cash flows from the financial markets - CORRECT
ANSWER - exceed
2 main questions - CORRECT ANSWER - 1. Capital budgeting
2. Capital structure
Capital budgeting decision - CORRECT ANSWER - What long-term investments should
the firm choose?
Fixed Assets
Capital structure decision - CORRECT ANSWER - How should the firm raise funds for
the selected investments
Liabilities and SH Equity
Ultimate goal of financial managers - CORRECT ANSWER - Shareholder wealth
maximization
= maximizing firm value
= maximizing stock price
, SH wealth - CORRECT ANSWER - stock price (fluctuates, want to maximize) * shares
outstanding (relatively stable)
Financial analyst reports are ___ looking - CORRECT ANSWER - forward
Annual and quarterly reports are __ looking - CORRECT ANSWER - backward
Media is ___ information - CORRECT ANSWER - current
Financial analyst reports, annual and quarterly reports, and media are all ___ information -
CORRECT ANSWER - public
Insider trading - CORRECT ANSWER - any time a person trades while aware of material
nonpublic information
Illegal
Mr. Rajaratnam sentenced to 11 years - tips from company executives and technology
consultants
Tips from Goldman Sachs director, classmate - got advanced warning of Warren Buffet
investment
types of financial statements - CORRECT ANSWER - balance sheet
income statement
accounting cash flow statement
finance cash flow statement
other
ACTUAL Exam Questions and CORRECT
Answers
What is corporate finance? - CORRECT ANSWER - What assets a company should buy
What projects to invest in
How to raise cash to finance these investments
in order to MAINTAIN AND MAXIMIZE ECONOMIC VALUE
Ultimately, the firm must be a __ - CORRECT ANSWER - cash generating activity
The cash flows from the firm must __ the cash flows from the financial markets - CORRECT
ANSWER - exceed
2 main questions - CORRECT ANSWER - 1. Capital budgeting
2. Capital structure
Capital budgeting decision - CORRECT ANSWER - What long-term investments should
the firm choose?
Fixed Assets
Capital structure decision - CORRECT ANSWER - How should the firm raise funds for
the selected investments
Liabilities and SH Equity
Ultimate goal of financial managers - CORRECT ANSWER - Shareholder wealth
maximization
= maximizing firm value
= maximizing stock price
, SH wealth - CORRECT ANSWER - stock price (fluctuates, want to maximize) * shares
outstanding (relatively stable)
Financial analyst reports are ___ looking - CORRECT ANSWER - forward
Annual and quarterly reports are __ looking - CORRECT ANSWER - backward
Media is ___ information - CORRECT ANSWER - current
Financial analyst reports, annual and quarterly reports, and media are all ___ information -
CORRECT ANSWER - public
Insider trading - CORRECT ANSWER - any time a person trades while aware of material
nonpublic information
Illegal
Mr. Rajaratnam sentenced to 11 years - tips from company executives and technology
consultants
Tips from Goldman Sachs director, classmate - got advanced warning of Warren Buffet
investment
types of financial statements - CORRECT ANSWER - balance sheet
income statement
accounting cash flow statement
finance cash flow statement
other
